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On the Disclosure of Half-Truths and the Duty to Update

Author

Listed:
  • Anne Beyer

    (Stanford University, Graduate School of Business, Stanford, California 94305)

  • Ronald A. Dye

    (Northwestern University, Kellogg School of Management, Evanston, Illinois 60208)

Abstract

We develop a model of a manager’s equilibrium voluntary disclosure policy to study how that policy changes depending on whether the manager is prohibited from disclosing, or allowed to disclose, a half-truth; we also examine how the disclosure policy changes depending on whether the manager has a duty to update past disclosures. Among our results, we show that if a manager is prohibited from issuing half-truths, the manager discloses a wider array of information than if the manager is allowed to issue half-truths, and investors view the absence of disclosure more skeptically; we also show that imposing a duty to update on the manager does not affect the manager’s initial disclosures, but it results in the manager disclosing uniformly more information over time.

Suggested Citation

  • Anne Beyer & Ronald A. Dye, 2023. "On the Disclosure of Half-Truths and the Duty to Update," Management Science, INFORMS, vol. 69(7), pages 4283-4311, July.
  • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:7:p:4283-4311
    DOI: 10.1287/mnsc.2022.4519
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    References listed on IDEAS

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    Cited by:

    1. Jinzhi Lu & Pingyang Gao, 2024. "Short, Disclose, and Distort," Papers 2404.07630, arXiv.org.

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